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Superannuation shake up

Changes announced in the 2016 Federal Budget will see the shutdown or conversion of tens of thousands of transition to retirement pensions (TTRPs) into full pensions.

An estimated 550,000 TTRPs are currently in place around Australia, used mainly by taxpayers in their late 50s and early 60s who are reducing their work hours, or by low-income earners who are trying to boost their super balances before retirement.

However, many are also used as a tax minimisation strategy by high income earners, as they enable workers over the age of 55 to access their super while still working.

To do this, individuals must salary sacrifice a portion of their income to a tax-free transition pension, which allows them to continue contributing to their super while paying 15 per cent super contributions tax. To supplement their take-home pay, individuals draw income from their TTRP account.

High income earners who don’t need extra cash withdraw money from their pension and pump it straight back in.

Under the Budget’s new rules, earnings generated by transition retirement pensions will be taxed at 15 per cent, rather than being tax-free.

High income earners who transfer money withdrawn from their TTRP directly back into superannuation will now be subject to a $500,000 lifetime limit on after-tax contributions.  

The changes mean that TTRPs would only be useful for those who require extra cash while they reduce working hour numbers of for those who can make larger contributions to super than they might otherwise.

Posted on 12 May '16 by , under Super.

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What to consider when consolidating your super

The ATO reported that 45% of working Australians were not aware that they had multiple super accounts in 2016. Having multiple super accounts is particularly common for individuals who have had more than one job. If this is you, it is important to identify and manage your super accounts because having more than one can be costly as a result of account fees from multiple funds.To combat this, you may want to consolidate your super, which moves all your super into one account. Not only does this save on fees, but it also makes your super easier to manage and keep track of.

Before consolidating your super, it is important to do the following:

Research your funds' policy
Compare your active super accounts so you can make the right choice about which one you should close. Things to assess include:

  • Exit fees
  • Insurance policies
  • Investment options
  • Ongoing service fees
  • Performance of the funds

Check employer contributions
Changing funds may affect how much your employer contributes, as some employers contribute more to certain funds. Check your current accounts to see if changing funds will affect this. Once you have selected a super fund, regardless of whether you choose a new super fund or one of your existing ones, provide your employer with the details they need to pay super into your selected account.

Gather the relevant information
When consolidating your super, you will need to have the following details ready:

  • Your tax file number.
  • Proof of identity. This could include your driver's license, birth certificate or passport.
  • Your fund's superannuation product identification number (SPIN).
  • Your fund's unique superannuation identifier (USI).
  • Details of your previous fund.

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